The Red Tape in Leases

The Red Tape in Leases

Car leasing is back, and it’s spring time in lease-land. If you’ve watched any major sporting event on television recently, you’ve seen the evidence. Advertisements constantly screech that drivers can get a new car for under $300, $250, even $200 per month. For any advertised payment, there’s always more than meets the eye (literally). If those prices seem so low that you think there must be a catch, you win the Red Tape skeptical reader award!

Leases have always been a complicated affair for consumers, and can be made more complicated by a fast-moving, fast-minded sales person for the uneducated potential lessee. Those low monthly payments come laden with some of the finest small print the auto industry can muster. But this new crop of leases have even trickier terms and deeper financial potholes, meaning careless or unaware buyers could easily end up with a lemon of a deal, or made to think they’re being given a ‘deal’ when they’re actually entitled to what they’re being pitched.

Marketers who design lease deals spend a long time playing with spreadsheets and data that show certain price points are very appetizing to consumers. But, getting those payments often does not come at a small price, and there’s no time to read the small print on the television.

Many leases require larger-than-normal down payments (“capital reduction”) to arrive at those seemingly magical monthly payments, even if what’s advertised is no money down. And, most of those leases are advertised with mileage allowances far lower than the miles driven by the average consumer – mileage limits that could leave a not-so-savvy lessee with a massive bill for going over those miles, and sometimes, a lease disposition fee as high as $595 to boot.

So how do you get a good deal on a lease? Ignoring the offers you see in print, or hear in advertisements is a good start. The car you buy will always vary from the deal you’ve heard about — there will be sales tax, registration, documentation fees, filing fees, and license plates to pay for (which are never included in the advertisement). And, most advertised cars are “bottom of the line-ers.” Take the fees just mentioned, add a set of floor mats, keyless entry, and the other extras you thought came standard with the car, and a $199/month deal becomes a $300+/month deal very quickly.

Barring any manufacturer incentives or specials through a direct mail program, if you or someone you know are thinking about a vehicle lease, here are some things you should know:

· The MSRP of the vehicle you’re considering, the “Capitalized Cost”, the residual value, and the money factor. This way, you can compare apples-to-apples as you’re shopping. Note: Money factors (based on credit) and residual values are fixed, and non-negotiable, but dealers can mark-up the money factor to make a few extra bucks. Only the Capitalized Cost of a lease is negotiable. It’s the selling price!
· Every lease requires one less payment than the term of the lease. For example, a 36 month lease only requires 35 actual payments. The first payment is always part of the lease inception fees. Even if you do negotiate a true $0 down lease, the first payment and all the upfront fees are being spread across the term of the lease. Anyone telling you that you don’t have to make a payment for 30 days isn’t giving you anything you wouldn’t get anyway. Everyone gets that.
· There is no such thing as waving any excess mileage charges, even if a sales person tells you that they can if you return for another vehicle. What they’re really saying is that they’ll wrap those fees into the price/lease of your next car. Those fees come from the lessor (the bank) and have nothing to do with a dealership.
· Unless there is a special lease “pull ahead” or “payment waiver” program, there’s no way that a dealer can just “take care” of your remaining payments. Those payments are simply being wrapped into your new vehicle payment, which means that you’re making the payment(s), and paying interest on top of interest. And, if you do have a vehicle with a few payments remaining that you’re looking to get out of…don’t just take that at face value. You could have equity…..yes…even in a leased vehicle!
· People love to quote payments that don’t include sales tax. If you’re given a payment, make sure to ask if it includes sales tax. Sales tax can drastically change a payment: $400 + LA County Tax = $439.
· Just because you are quoted a price on a vehicle, doesn’t mean that the person quoting you the price has or can get the car. Make sure to ask about availability. If the car isn’t available to that person, the pricing can be offered, but not honored.

At DriveWise Auto, we don’t believe in Red Tape…we believe in Scotch Tape…clear from beginning to end, and transparent from one side to the other. We’re honest, up front, and always ethical in the way we work with our clients.

“The professional success of DriveWise Auto is rooted in our passion and follow through. These qualities gave us the ability to create DriveWise Auto, a company that now allows us to cultivate and combine our personal and professional strengths, philosophies, visions and philanthropic standards. We demonstrate these qualities on a daily basis, which compels our clients to assist us in the growth of our business and the pursuit of our success.” – DriveWise Auto Founders, Adam Slobin and Bryan Weissman